How is GST Going to Affect Real Estate Service Sector in India

By Registrationwala

3rd April 2017


With India raring to adopt an unprecedented GST tax regime for the first time ever, the speculation over its possible impact on the nation’s real estate service sector is also brewing more. Real estate accounts for five percent of the country’s GDP according to E&Y 2015 report.

Like other sectors too, the inclusion of GST in real estate sector will pave the way for the possible omission of multiple taxes in the form of service tax, excise, stamp duty, VAT and many more. Definitely, it will come as a blessing in disguise for potential property owners. From this financial year onwards the government will charge a single nation-wide tax in the form of GST instead of several others.

While the customers can heave a sigh of relief as they would need to file a single GST instead of several other taxes, there is a reason to worry too. If the standard GST rate is calculated on real estate property – they may have to pay more.

How GST can affect Other Taxes at Real Estate Sector

VAT (Value Added Tax): In states like Haryana, Maharashtra and Karnataka, VAT is required to be paid by a developer when a customer buys an under construction flat. The developer needs to deposit the VAT with the state governments. The actual rate of VAT varies from states to states. It makes the taxation process cumbersome as the developers may have to maintain certain books of accounts on the basis of states where transactions take place.

Service Tax: A developer charges a certain amount of money as service taxes to customers on sale of a residential property. The matter of applicable service rate (presently around 3.75%) on construction property is currently a sub judice matter before the Supreme Court of India.

Stamp Duty: This is a state tax charged for the registration of real estate transactions. It attracts a nominal cost but a legal formality must be fulfilled. Though there will be less paperworks, it’s still uncertain whether a customer will pay more money in the form of stamp duty or not in the GST era.

What Experts Feel About GST’s inclusion in Real Estate Sector?

Economists feel that inclusion of GST in the nation’s economy will be a rewarding experience. GST (Goods and Service Tax) will boost the country’s economic growth and development process by at least 2 per cent.

GST will indirectly bring down the processing cost and may result in a reduction in prices of newly built flats, villas and other residential properties. Actually, a developer has to pay multiple taxes at different levels on procuring real estate materials.

These go on to add to the final price of the buildings and eventually customers have to bear the brunt of indirect taxation – as they pay it. GST aims to simplify this taxation procedure for all. Another advantage of the inclusion of GST in real estate sector is transparency.

The inclusion of real estate service sector within the ambit of GST will make the audit process authenticate, simpler and better. As of now, a few of the Indian states have already geared up to roll out GST from 1st April onwards. Other states will also implement the same in the next few days.


How is GST Going to Affect Real Estate Service Sector in India